Rik - why do you say the volatility has been rough on short positions ? I would have thought it is choppy in both direction (albeit negative turns do seem to be a bit steeper than the gains...).
Also, a few questions with respect to my Best charts process: 1. Optimise frequently vs optimise once and hold until there is evidence that the parameters are no longer working. At this stage, I would err on the optimise frequently side, but I have read many posts which suggest the opposite. What is your current thinking ? 2. Buy and sell signals - the paper test I just did used buy and sell actions based on the individual stock's trend. So if the trend was bearish, I sold and vice versa for buying. I did not restrict buy and sell actions to the explicit signals in Best Charts (ie. I did not wait to see a 1.bullish or bearish.1). Do you think this practice is sound (I guess I am only catching part of the long or short action like this) ? If I was to use the frequent optimisation method and I waited for the 1.bullish or bearish.1 signals, then they may never appear due to the constantly changing parameters. Thanks Paul --- In [email protected], Henrik Rasmussen <rikrasmus...@...> wrote: > > That is some nice work Paul. > > I am not surprised that shorter periods did well, given the short term > volatility of the markets. > > I think the volatility has also been rough on short positions, except maybe > those short on BP stock. : ) > > > _____________ > Rik Rasmussen > > > On Sat, Jun 19, 2010 at 9:28 AM, tzsuj <tz...@...> wrote: > > > Dear Forum > > > > I'm a relatively new user of Best Charts haven't use it for real yet, but > > am trying to get a handle on it theoretically first. BC seems to be an > > interesting and potentially powerful tool, but unfortunately it will take a > > bit of testing to get it set-up before I can use it with confidence.... > > > > I completed my first test run and I thought I would publish some of the > > results to get some discussion going on here and also feedback from some > > of the more advanced forum members. > > > > Some specifics of the test: > > > > Test Period: 19 April '10 to 17 May `10 > > Test Stocks: Top 20 Australian stocks by market capitalisation (I used > > these as they are large, well traded stocks good volumes, and hopefully > > the market is well enough informed such that true technical analysis > > principles can operate) > > Test Indicator: BCI (I only did the BCI indicator as based on previous > > optimisation testing, it seemed to give the best overall gains) > > Parameters: BCI was `optimised' each day (according to the series > > description below). I realise that the last parameter of the BCI is user > > defined and not automatically optimised I just left this as the default. > > Buy/Sell Triggers: Instruction from the optimisation output each day > > simply go long when `Bullish' and go short when `Bearish' (as per the intent > > of the test series below) > > Prices Used: Buy/sell at the opening price on the day following the signal > > generation. > > Stop Losses: No stop loss triggers were used investment was held until > > the signal changed. > > Brokerage Costs: No brokerage costs were taken into account > > > > Test Series: #1 Test Performance on Long Investment Only > > Optimisation Period: 229 days > > Optimise on Long Only > > Invest Long Only > > > > Test Series: #2a Test Performance on Long and Short Investment > > Optimisation Period: 229 days > > Optimise on Long & Short > > Invest Long Only > > > > Test Series: #2b Test Performance on Long and Short Investment > > Optimisation Period: 229 days > > Optimise on Long & Short > > Invest Long & Short > > > > Test Series: #3a to 3h Test Performance on Optimisation Period > > Optimisation Period: 20, 60, 90, 120, 150, 180, 250, 320 days respectively > > Optimise on Long & Short > > Invest Long & Short > > > > Issues that may have affected the results/market: > > > > The overall ASX market during the test period commenced at the start of a > > downtrend, 3 weeks duration. Recovery in the last week. > > The Greek sovereign debt crisis was rearing its head during the test period > > and got decidedly worse during the latter half of the test period. > > The Australian government announced the imposition of a higher rate of > > taxation on mining companies during the last week of the test period this > > had a severe negative effect on resource stocks and resource service > > industry type stocks. > > > > > > Test results: > > 1. Interestingly, the percentage of winning trades for each test series > > (so # of winning trades for all 20 stocks in each test series compared to > > the total # of trades for all 20 stocks in each test series) came in at > > around 50% - the law of averages...... series #1 was low @ 38%, but the rest > > ranged from high 40's to mid 50's. This would suggest to me that using BCI > > in the way that I did is no better than flipping a coin 50% of the time > > you will get heads and 50% of the time you will get tails. This is a bit > > disappointing as I would view the ability to pick a winning trade as one of > > the most important metrics you need to be on winning trades for something > > like 70% of the time to have some sort of confidence that you are on the > > right track. > > > > 2. In terms of the most number of winning trades, tests 3b (60 day), 3c > > (90 day) and 3e (150 day) were the best performers with winning rates of > > 57%, 54% and 59% respectively. Encouraging, but not stellar. > > > > 3. 2/20 stocks did extremely well in terms of the # of test series with > > winning trades <70% - RIO (6/11 test series) and WOW (8/11 test series) > > one resource stock and a consumer staple stock. During the test period, RIO > > was in a major down trend and WOW was in a range-bound pattern. As a > > comparison other stocks in the test population of 20 came in at 2-3 (at > > best) with series trades >70% winners. I don't know if there is anything to > > be read from this observation...... > > > > 4. % winning LONG trades (41-67%) was decidedly greater than the % winning > > SHORT trades (29-36%) for all test series. This is interesting, but not > > sure what I can conclude from it. It seems to suggest that BCI's shorting > > accuracy is less than that of long trigger accuracy. If you were to extend > > this concept and say, only invest long (but optimise on long and short), you > > would come up with a better outcome, but you would still only get in the > > high 60%'s for # of winning trades close but not quite at the comfort > > level. WOW performed very well in terms of % of long winning trades 7/11 > > tests achieved >70% winners. > > > > 5. It is difficult to present statistically correct and meaningful data > > for this item, but in general, the % gain/trade for winning shorts was > > significantly greater compared to the gain/trade for winning long trades. % > > Losses/trade for losing longs and losing shorts were about equal. > > > > 6. Performance against benchmarks 4 benchmarks were used - #1 was the > > `buy and hold' movement of the share price for each stock during the test > > period, #2 was a theoretical 7% pa return, #3 was the movement of the ASX > > 200 index (top 200 ASX stocks) over the test period, and #4 preservation of > > invested capital. > > 6a. Stock buy and hold - All test series performed considerably better > > than the buy and hold scenario for each stock the BCI series achieved > > gains > the benchmark for between 70-90% of the 20 stock test set. > > 6b. Nominal 7%pa interest Mixed results. Series 1 and 2a were > > decidedly worse than the benchmark (10-15% of stocks outperformed the > > benchmark) this is logical as these were series without shorting (so less > > time in the market compared to a constant 7% earning rate). Other series > > ranged from 40-70%, with best performers being 3b (70%), 3c (65%) and 3e > > (65%). The remainder averaged out at the 50% mark......the law of averages > > again ?? > > 6c. ASX200 buy and hold similar to 6a not surprising given make-up > > of ASX200 index. > > 6d. Preservation of capital initial investment capital was preserved > > in most series (generally 60-70% of the 20 stocks preserved capital, for > > each of the test series), with the exception of series 1 and 2a (only 20% of > > the stocks preserved capital). The inability to short in these series is > > the obvious difference to the other series, however this doesn't explain the > > poor performance if you couldn't short, then you just keep the money > > uninvented so no risk. The only reason I can think of here is that the > > falling market did not correlate well with the 229 day test period data and > > the long only optimisation condition (for test 1) and the mismatched > > optimisation (long and short) vs investment practice (long only) (for test > > 2a) resulted in BCI not predicting well. > > > > 7. Annualised % returns across the 20 stock spread if you invested equal > > initial amounts across the 20 stocks for each of the series, the following > > annualised returns are realised: > > > > Series 1 -38% pa > > Series 2a -41% pa > > Series 2b -1% pa > > Series 3a 22% pa > > Series 3b 47% pa > > Series 3c 44% pa > > Series 3d -26% pa > > Series 3e 20% pa > > Series 3f 24% pa > > Series 3g -13% pa > > Series 3h 3% pa > > Benchmark 1 -87% pa > > Benchmark 2 7% pa > > Benchmark 3 -94% pa > > Benchmark 4 0% pa > > > > > > So, in summary, the BCI testing showed OK results against a `buy and hold' > > strategy in a falling market, but the specific process used did not deliver > > consistently high probability results (refer point 1). Shorter optimisation > > periods (60 and 90 day) seem to work the best in this instance. Long > > trading was more successful than shorting (don't know why this is counter > > market trend) and shorting wins were bigger than long wins. No results came > > close the optimised theoretical backtest results of ++100%pa (not sure if > > this is realistic though). > > > > I will conduct more testing going forward. > > > > Any comments or suggestions. Analysis spreadsheet is available upon > > request (it is a bit messy, but you will get the idea). > > > > > > Paul > > > > > > > > > > ------------------------------------ > > > > Yahoo! Groups Links > > > > > > > > >
